September 20, 2010: Fantasy Football and Your Income Portfolio
Is there a potential Bill Gross or Sir John Templeton who consistently assembles the winning fantasy football team? Effective portfolio selection and constructing the moving parts of a fantasy football team utilize similar concepts. The list below illustrates the premise.
1. Admit you are probably not the most astute member of the league. You probably aren't. Warren Buffett is fond of saying "if you are playing poker and ... don't know who the patsy is, it's you." A well prepared investor knows that there are many investors who know more about any given acquisition at any time, given the advanced information gathering techniques available. Play to win, but don't get cocky.
2. Be prepared in advance for acquisition. Have a plan. You should know your risk tolerance and begin to implement a strategy to suit your long term needs.In fantasy football roster assimilation, one does not chose a tight end, kicker and an aged running back with the first few selections to form a core holding. The core holding for stability is a quarterback. For most investors a portfolio of relatively stable, diversified low cost income etf's should be at the center of one's portfolio. Other, more speculative securities may be added to provide zest for your planned acquisitions to fill out the portfolio.
3. Acquire proven quality with your first picks. Don't speculate at this stage. You need Drew Brees, not Seneca Wallace. At this time, Vanguard's Short Term Corporate Bond ETF (BSV), Templeton's Global Income Fund (GIM) and PIMCO's Short Term Maturity Strategy ETF (MINT) fit the bill.
4. Create a balanced roster. Don't overload in one yield field. Drew Brees alone won't guarantee your fantasy football team a victory, nor will government bonds do likewise for your portfolio. You need a productive running back, wide receiver, tight end, kicker, defensive unit and a flexible bench. Weak or under-represented income sectors will cause you to under perform. Solid picks in this category are IShare's U.S. Preferred Stock Index ETF (PFF), Powershare's Commodity Index Tracking ETF (DBC),Barclay's Capital Convertible Securities ETF (CWB), Barclay's Capital Aggregate Short/Intermediate Bond ETF (LAG),IShare's Emerging Market Debt ETF (EMB) and for your defense, the Permanent Portfolio Fund (PRPFX). In a previous column, I outlined a "do-it-yourself" permanent portfolio fund using etf's that will likely mimic PRPFX. Gold alone as a hedge is best purchased through IShare's Gold ETF (IAU).
5. Work hardest to find overlooked acquisitions. Sweat the details. Some of my finest fantasy picks and securities have been chosen by digging through details to discover overlooked gems. Arian Foster and Wes Cooley come to mind. High yields can be achieved through disciplined acquisition of preferred stocks, especially structured preferreds. My criteria for selecting these 6.75-8% gems is a multi-step process: investment grade, decent trading volume, yield is compelling (you will regularly find mispriced preferreds as the computer model fast traders generally don't appear to hit them hard), buy below the call price and sell when the stock price is 5% or greater over the call. An example is Deutsche Bank Capital Trust II (DXB). I also like preferred securities that play a nice dividend plus have inflation protection over and above TIPS, such as Prudential Financial, Inc. Preferred (PFK).
6. Always look to upgrade your roster. Don't hesitate to jettison a weak performer, but don't churn your roster. When an acquisition goes down due to injury or poor performance, dump it. Why hold into a Ryan Grant or Sidney Rice, hoping against hope they return from an injury? Why hold significant positions in long duration bonds or solely in U.S. Dollars just to tweak yield when the present economic climate begs for future inflation to pay off our trillions of dollars in debt with cheap dollars? Explore select Master Limited Partnership's individually, not bundled into an etf at this time.
7. Be gracious in victory. Learn from your defeats. While winning with well-chosen acquisitions provide a measure of wealth (monetary, ego or both), defeat - losing with your best laid strategy - offers an opportunity to learn and better prepare for the next round of opportunities.
8. Luck does play a part in success. Remember that the more prepared you are, the luckier you get.
1. Admit you are probably not the most astute member of the league. You probably aren't. Warren Buffett is fond of saying "if you are playing poker and ... don't know who the patsy is, it's you." A well prepared investor knows that there are many investors who know more about any given acquisition at any time, given the advanced information gathering techniques available. Play to win, but don't get cocky.
2. Be prepared in advance for acquisition. Have a plan. You should know your risk tolerance and begin to implement a strategy to suit your long term needs.In fantasy football roster assimilation, one does not chose a tight end, kicker and an aged running back with the first few selections to form a core holding. The core holding for stability is a quarterback. For most investors a portfolio of relatively stable, diversified low cost income etf's should be at the center of one's portfolio. Other, more speculative securities may be added to provide zest for your planned acquisitions to fill out the portfolio.
3. Acquire proven quality with your first picks. Don't speculate at this stage. You need Drew Brees, not Seneca Wallace. At this time, Vanguard's Short Term Corporate Bond ETF (BSV), Templeton's Global Income Fund (GIM) and PIMCO's Short Term Maturity Strategy ETF (MINT) fit the bill.
4. Create a balanced roster. Don't overload in one yield field. Drew Brees alone won't guarantee your fantasy football team a victory, nor will government bonds do likewise for your portfolio. You need a productive running back, wide receiver, tight end, kicker, defensive unit and a flexible bench. Weak or under-represented income sectors will cause you to under perform. Solid picks in this category are IShare's U.S. Preferred Stock Index ETF (PFF), Powershare's Commodity Index Tracking ETF (DBC),Barclay's Capital Convertible Securities ETF (CWB), Barclay's Capital Aggregate Short/Intermediate Bond ETF (LAG),IShare's Emerging Market Debt ETF (EMB) and for your defense, the Permanent Portfolio Fund (PRPFX). In a previous column, I outlined a "do-it-yourself" permanent portfolio fund using etf's that will likely mimic PRPFX. Gold alone as a hedge is best purchased through IShare's Gold ETF (IAU).
5. Work hardest to find overlooked acquisitions. Sweat the details. Some of my finest fantasy picks and securities have been chosen by digging through details to discover overlooked gems. Arian Foster and Wes Cooley come to mind. High yields can be achieved through disciplined acquisition of preferred stocks, especially structured preferreds. My criteria for selecting these 6.75-8% gems is a multi-step process: investment grade, decent trading volume, yield is compelling (you will regularly find mispriced preferreds as the computer model fast traders generally don't appear to hit them hard), buy below the call price and sell when the stock price is 5% or greater over the call. An example is Deutsche Bank Capital Trust II (DXB). I also like preferred securities that play a nice dividend plus have inflation protection over and above TIPS, such as Prudential Financial, Inc. Preferred (PFK).
6. Always look to upgrade your roster. Don't hesitate to jettison a weak performer, but don't churn your roster. When an acquisition goes down due to injury or poor performance, dump it. Why hold into a Ryan Grant or Sidney Rice, hoping against hope they return from an injury? Why hold significant positions in long duration bonds or solely in U.S. Dollars just to tweak yield when the present economic climate begs for future inflation to pay off our trillions of dollars in debt with cheap dollars? Explore select Master Limited Partnership's individually, not bundled into an etf at this time.
7. Be gracious in victory. Learn from your defeats. While winning with well-chosen acquisitions provide a measure of wealth (monetary, ego or both), defeat - losing with your best laid strategy - offers an opportunity to learn and better prepare for the next round of opportunities.
8. Luck does play a part in success. Remember that the more prepared you are, the luckier you get.
posted by T @ 9/19/2010 08:08:00 PM
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